Volatility Hedge Fund Manager Unpacks Derivatives Misconceptions | Benn Eifert
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Scale is the blockchain that's truly built different. Explore more at scale.space/ecosystem and follow them on x at scale network. Crypto's premier institutional conference is returning to New York on March. We're hosting one of the world's best crypto conferences for institutional and professionals alike. It's gonna be a ton of fun. I'm gonna be there hosting a variety of different panels. I'll be doing a fireside chat with Mohammed El Erian, a different macro panel with Jim Bianco and Joseph Wang. And we're also gonna be doing a live Ford guidance round up there where myself, Tyler, and Quin
Awesome, man. It's really great to be back. Thank you. Nice to see you.
Yeah. Yeah. Likewise. Okay. So I wanna start off from the top line for those that may not be aware of of what you do and and what do, you know, vol focused hedge funds do as a principal. So I'd love to just, you know, open it up to you to talk a little bit about, like, what does it mean to put forth, you know, volatility focused strategies, and what are some of the different tools in the tool shed that you utilize to actually put on these trades and how to focus on them?
Sure. Absolutely. So, I'll I'll speak for us. Obviously, there's lots of different kinds of volume derivatives funds, but at least in terms of how we think about the world. You know, ultimately, derivatives markets are sort of these secondary markets. Right? Not sort of equity markets or they're not really about asset allocation. They're about, you know, the the dominant forces are the end users of derivatives who are not are volatility arbitressurers with PhDs in math. They're just sort of pension funds that have some hedging to do or retail investors who are buying structured notes for, you
To execute on on those different types of trades, there's there's a lot of different vehicles, that could be utilized for for different reasons. So I'd love to just, you know, allow you to, you know, educate and just kinda get people up to speed on on some of those different tools. You know, there's, different obviously, you know, you can decide on how to isolate, the types of risks that you wanna expose yourself to and, you know, what are you trying to focus on in terms of capturing that alpha. So we'd love to just hear, for example, like, you know, just starting from the top line. Like, what
Absolutely. So there's I I would first make a a one big categorization or distinction, from a product perspective into, listed products, things like options. And then on the other hand, OTC products, so things like variance swaps, that you mentioned. You know, so opt when you think about volatility, options and vanilla options are really the benchmark building block of, you know, all derivatives in a sense or or is all all volatility exposures. Options have been around for an extremely long time. Right? You know, a call option gives you the right to buy a stock at a predetermined price on a pr
Interesting. Okay. So I wanna I wanna take that, lens and and elevate it to just getting a good understanding of what is what is what's the big goal here of of of what you do specifically and what, you know, these these vol focus funds do is that to basically just, you know, capture alpha that has nothing related to beta, like market beta. So, like, you know, just to put that super simply, it's like, you don't really care where the S and P goes on any given day. You're super focused on isolated, you know, risk reward profiles. And, to that end, there's there's very, you know, not not not simpl
Yeah. Exactly. So we do a few different things. Absolu
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